A strong performance by its Australian operation enabled Kidderminster carpet manufacturer Victoria to offset disappointing UK sales and post a 25 per cent rise in first-half pre-tax profits.

The company yesterday said that despite a challenging UK environment, it remained optimistic that its overall performance would be ahead of last year and in line with both management and market expectations.

The carpet manufacturer, which also operates in Ireland and Canada, said its pretax profit for the half year to the end of September rose to £1.25 million from £1 million last year.

Revenue increased 6.4 per cent to £28.76 million from £27.03 million.

In the UK the company said the carpet market had been adversely affected by a number of factors which had resulted in a challenging trading environment.

Overall it said the market was probably down somewhere between five to 10 per cent, influenced by successive interest rate rises, the sub-prime financial crisis, lower disposable incomes and a slowing down in the housing market.

The company said trading in the first four months of the period had seen UK sales reasonably ahead of the corresponding period last year. However, there had been a marked decline during August and September.

This left revenues up 1.1 per cent for the half-year at £12.4 million, resulting in an operating profit decline of 23.2 per cent to £262,000 and a profit before tax of £135,000.

Group managing director Alan Bullock said that to remain competitive the company had invested in new plant and product during the first half to strengthen its position for the key second half period.

"We have spent significantly on new products and point-of-sale displays to ensure we can take advantage of all opportunities during the second half," he said.

The company also fared badly in Ireland where sales were down 13.7 per cent to £2.61 million and pre-tax profit dropped 46 per cent to £100,000.

Victoria blamed the "lumpy" nature of contract sales and a slowing in the Irish economy for the decline.

However, the disappointing situation in the UK and Irish markets was completely over-shadowed by the spectacular growth seen Down Under where the company increased its market share to around 15 per cent.

Revenues grew strongly from £11.7 million last year to £13.7 million, an increase of 17.1 per cent, with especially good results in Western Australia and Queensland due to the booming housing market in the states.

New products also enabled the company to increase its gross profit margin by 2.8 per cent.

Operating profit increased by £490,000, up by 53.2 per cent to £1.41 million and pre-tax profit by 61.1 per cent to £1.28 million compared with £790,000 last year.

"Clearly all parts of the group are profitable and we are lucky because of the diverse nature of the business," said Mr Bullock. "When economic conditions are tougher in one market as they currently are in the UK, then we have been able to offset this with a strong performance elsewhere - as we have seen with Australia," he added.

The group's Canadian affiliate Colin Campbell also continued to make good progress, with revenues up 13.6 per cent and pre-tax profit up 6.5 per cent on the corresponding period last year.

Chairman Bob Gilbert, who steps down next month after 11 years in office, said: "The continued growth we envisage from both existing product brands, recently introduced product styles and other initiatives will, we believe, enable us to take full advantage of our market leading position and successfully deal with whatever market conditions prevail."